Fuel Prices

[Phillyfanfrombirth]

Demand doesn't fall in normal economic conditions... it only goes one way, up. Even @ $60, demand was up about 2% on a year over year basis... it wasn't until the Katrina straw, that the camel's back was broken and demand deteriorated to the negative side.

It has recently, as the price of oil has come in to the high 50s, come back to flat year over year...

I'm not one to blame the oil companies for doing business... I blame our government's policies, strong foreign demand, and our own surprisingly robust economy... The government limits our supply, and the economy provides greater demand. It is (was) a train wreck in the making, especially when you add in the speculative aspect.

As far as why I ask you a loaded question, the same market forces are at work today as they were 7 years ago... people tend to like markets when the stuff they want to buy is cheaper than it otherwise was, as was the case from 83-early2000 (with the exception of Gulf War I spikes in 1990-1991), then cry foul when the market goes against their best interests.

As any commodity trader will tell you, the best cure for low prices... is low prices. The best cure for high prices... is high prices.

[Unit 5302]

The biggest reason that oil prices had fallen so low in the late 90s was OPEC. The nations would collectively agree to limit production to a certain level, and inevitably, one nation would break the agreement and start pumping to beat hell.

The disagreements on production go quite a ways back, and it was one reason why Iraq invaded Kuwait. The two were sitting on an oil field that was under both countries, and on one side, Kuwait was pumping to beat all hell. It would be similar to Canada was cutting down trees for wood in Glacier National Park, and amazingly enough, it got Iraq a little poed.

With OPEC finally more unified, they have actually been controlling production a lot better, and it would have resulted in oil priced around the target of $30/bbl if it hadn't been for crazy people getting into a futures bid war, and the unexpected large increase in demand from Asian markets.